Structured Finance Market Size, Share, Growth, And Industry Analysis, By Type (Asset-backed securities (ABS), Collateralized debt obligations (CBO) and Mortgage-backed securities (MBS)), By Application (Large Enterprise and Medium Enterprise), Regional Forecast By 2031

Updated On: 01 April 2024

Structured Finance Market Report Overview

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The global structured finance market size was USD 1530110.0 million in 2021, as per our research, the market is expected to reach USD 3,757,918.98 million in 2031, exhibiting a CAGR of 12.71% during the forecast period.

The global COVID-19 pandemic has been unprecedented and staggering, with structured finance experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. The sudden decline in CAGR is attributable to the market's growth and demand returning to pre-pandemic levels once the pandemic is over. 

In the fields of finance and economics, the practice of aggregating different kinds of contractual debt obligations into securities is referred to as structured finance. Investors are subsequently presented with these securities in the form of bonds, notes, or other tradable assets. It aims to spread out risk among a lot of investors in order to lower risk. Companies with complicated funding demands, which are typically unsolvable with conventional financing, can use it as a financial tool.

Investor demand for finance products is rising as a result of these products' superior yields and liquidity to traditional investments. Corporate profits are rising as a result of the expansion of the world economy, and enterprises of all sizes are more in need of finance. Innovation and creation of new structured finances instruments, such asset-backed securities (ABS) and collateralized debt obligations, that cater to investor needs (CDOs). Financial institutions are using securitization more and more to lower their risk exposure and strengthen their balance sheets.

COVID-19 Impact: Decreased Consumer Demand to Thrash Market Performance

Over the past few months, the majority of sectors in the world have experienced unfavorable effects. This can be ascribed to the enormous disruptions that various precautionary lockdowns and other limitations that were imposed by governing agencies around the world caused in their respective production and supply-chain operations. The same holds true for the worldwide market for collateralized debt obligations.

Additionally, consumer demand has now decreased as people have been more intent on cutting down non-essential expenses from their individual budgets as the general economic condition of the majority of people has been adversely impacted by this outbreak. Over the anticipated time frame, the aforementioned factors are anticipated to have a negative impact on the revenue trajectory of the market. However, the industry is anticipated to rebound in line with this when individual regulating agencies start to lift these enforced lockdowns.

Latest Trends

"Large Enterprises to Provide Impetus to the Market Sales"

The market share that belonged to large businesses was highest. Large businesses use structured finance products the most because they provide bigger credit ceilings and longer tenors than other traditional forms of borrowing. The capacity of large companies with various organizational structures and business models to raise capital more easily and affordably thanks to the availability of a wide range of financial instruments is what is anticipated to drive demand during the projection period. Due to rising penetration in emerging economies, the medium enterprise application category is anticipated to experience considerable growth over the course of the projected period.

Structured Finance Market Segmentation

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• By Type Analysis

According to type, the market can be segmented into asset-backed securities (ABS), collateralized debt obligations (CBO) and mortgage-backed securities (MBS).

In terms of product, collateralized debt obligations is the largest segment.

• By Application Analysis

Based on application, the market can be divided into large enterprise and medium enterprise.

In terms of application, large enterprise is the largest segment.

Driving Factors

"Unsophisticated Funding to Fuel Market Performance"

Investors are typically required to supply structured finance since it is necessary for significant capital injection into a firm or organization. Unlike a regular loan, which can be transferred between different types of debt, structured financial products are nearly invariably non-transferable. Corporations, governments, and financial intermediaries are increasingly utilizing structured financing and securitization to control risk, build financial markets, broaden clientele, and create new funding instruments for complicated, developing, and emerging markets. Because of the risk transfer from sellers to buyers of the structured products, these entities' use of structured financing alters cash flows and changes the liquidity of financial portfolios. Financial firms have also benefited from using structured financing methods to enable them delete certain assets from their balance sheets. CDOs are anticipated to boost structured finance market growth.

"Collateralized Debt Obligations (CDOs) to Support Market Sales"

Structured finance products include collateralized debt obligations (CDOs). It is a debt that is supported by a collection of assets and collateral (security). Real land, business property, or personal property like furniture, cars, or other assets are all acceptable forms of security. The three primary parts of a CDO are the service provider, the originator, and the investor or lender. The fact that CDOs interest rates are typically greater than those of standard savings or money market accounts is another advantage of CDOs. You can find CDs that offer large interest on your deposit, depending on the financial institution and the CDO's length.

Restraining Factors

"Monopolistic Market Structure to Impede Market Expansion"

A lack of coordination between multiple financial organizations is a problem for the financial system. Lack of coordination is caused by the existence of several financial institutions and government involvement in powers that control these organizations. Numerous financial organizations hold dominant positions in the market. Two companies that have seized a significant portion of the mutual fund and life insurance markets are LIC and UTI. These massive systems could result in poor or ineffective financial management.

Structured Finance Market Regional Insights

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"Asia Pacific to Dominate the Market Due to Large Project Investments"

Over the forecast period, the Asia Pacific is anticipated to experience the quickest growth and has largest structured finance market share. The expansion might be ascribed to rising infrastructure project investments in emerging economies. For instance, a white paper released by the world economic forum claims that infrastructure investment worldwide has peaked.

Demand for structured finance instruments like ABS and CDO, which offer funding for long-term projects with recurring payments over a set length of time, is expected to increase as investments rise. Due to the high demand from medium-sized businesses looking to improve their financial performance through Structured Asset Finance transactions and regulatory support aimed at lowering the risk associated with these transactions by providing guidelines on valuation methodologies, Europe accounted for the second-largest volume of transactions.

Key Industry Players

"Key Players Focus on Partnerships to Gain a Competitive Advantage "

Prominent market players are making collaborative efforts by partnering with other companies to stay ahead of the competition. Many companies are also investing in new product launches to expand their product portfolio. Mergers and acquisitions are also among the key strategies used by players to expand their product portfolios.

List of Market Players Profiled

• Morgan Stanley (U.S.)
• HSBC (Honk kong )
• Bank of America Merrill Lynch (U.S.)
• Deutsche Bank (Germany)
• Barclays (U.K.)
• Citigroup (U.S.)
• Goldman Sachs (U.S.)
• UBS (Switzerland)
• JP Morgan Chase (U.S.)
• Credit Suisse (Switzerland)

Report Coverage

This research profiles a report with extensive studies that take into description the firms that exist in the market affecting the forecasting period. With detailed studies done, it also offers a comprehensive analysis by inspecting the factors like segmentation, opportunities, industrial developments, trends, growth, size, share, restraints, etc. This analysis is subject to alteration if the key players and probable analysis of market dynamics change.